IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH `B' CHANDIGARH
BEFORE SHRI H.L.KARWA, VICE PRESIDENT
AND SHRI T.R.SOOD, ACCOUNTANT MEMBER
ITA No.197/CHD/2012
Assessment Year: 2008-09
Smt. Saroj Bala, V Addl. CI T,
Prop. Shri Ram Rice & Gen.Mills, Kurukshetra Range
Dhand, Kaithal. Kurukshetra.
PAN: AGZPG-5384Q
(Appellant) (Respondent)
Appellant by : Smt. Jyoti
Respondent by : Shri Akhilesh Gupta
Date of Hearing : 11.06.2012
Date of Pronouncement : 13.06.2012
ORDER
PER T.R.SOOD, AM
In this appeal, assessee has raised following grounds:
1. That the orders of the Ld. CIT (A), Chandigarh is
arbitrary based on extraneous considerations,
devoid of f acts on record, against principles
of justice theref ore illegal, erroneous,
perverse and thus uncalled f or.
2. That without prejudice to the above ground of
appeal the appellant disputes the addition on
account of Freight Charges of Rs. 91,316/- u/s
40(a)(ia) of Income Tax Act, 1961.
3. That without prejudice to the above ground of
appeal the appellant disputes the disallo wance of
Labour Expenses of Rs. 1,00,000/- on estimation
basis and the addition thereof ."
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4. That without prejudice to the above ground of
appeal the appellant disputes the addition on
account of Lo w Household expenses."
2. The first ground is of general nature and does not
require separate adjudication.
3. In Ground No. 2, during assessment proceedings, AO
noticed that assessee has claimed freight expenses, out of
which a sum of Rs.91,316/- was in respect of truck No. HR-
08-7008 on which no TDS was deducted and therefore, this
sum was added to the income of the assessee. On appeal, the
addition was confirmed by the ld. CIT(A).
4. Before us, ld. counsel for the assessee submitted that
this amount was paid during the year, therefore no
disallowance can be made in view of the decision of Special
Bench in case of Merilyn Shiping & Transports V ACIT,
Vishakhapatnam (IT Appeal No. 477 (VIZ) 2008, dated
29.03.2012, wherein it was held that the addition u/s
40(a)(ia) can be made in respect of amounts payable.
5. On the other hand, ld. DR submitted that it is not clear
from records, whether the amount was paid during the year
or not. Therefore, same may be sent for verification.
6. After considering the rival submissions, it is not clear
from records whether the amount was paid during the year or
not. Therefore, in interest of justice, we set aside the order of
the CIT(A) and remit the matter back to the file of AO for
fresh examination and the same may be decided in the light
of Special Bench decision in the case of Merilyn Shipping &
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Transports (supra).
7. In Ground No.3, after hearing from both the parties, we
find, during assessment proceedings AO noticed that GP rate
of the assessee has fallen from 2.29% in last year to 2.22% in
the year. In response to the query, it was stated as under :
" The assessee vide letter dated 13.10.2010
expl ained that there is minor diff erence of 0.07% in
the GP rate when compared to previous assessment
year. This is due to 16383.76 quintal of govt. milling
done during the assessment year 2007-08. If we
deduct all the amount received due to Govt. mill ing
and also reduce the expenditure made f or the Govt.
mill ing, we f ind that the GP ratio during the relevant
assessment year is much higher. During the year no
Govt. mill ing was done."
8. The AO was not satisfied with the above reply because
method adopted by assessee was not correct, because gross
profit for the last year of self milling @ 0.03% does not
appear to be reasonable. He, also noted that husk has been
valued at estimated value. Further, it was found that
opening stock of the super fine rice was valued at Rs.1349.95
per quintal, whereas the average purchase rate was
Rs.1154.69 per quintal and average sale price was
Rs.1122.60 per quintal. The closing stock was valued at
Rs.1500/-. In response, it was stated that value of the
closing stock was much higher than the last sale price of
Rs.1400/- per quintal. Therefore, no fault can be found with
the valuation of closing stock. In view of these
discrepancies, AO made an adhoc addition of Rs.4,00,000/-
towards trading results of the assessee.
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9. Before CIT(A), similar submissions were reiterated. The
ld. CIT(A) after considering the submissions, restricted the
addition to Rs.1,00,000/- vide para 2.04, which is as under :
"2.04 No pl ausible expl anation of the above
def iciencies noted by the AO coul d be given by the
appell an t in the wr itten sub mis sions exce pt to
reiterate the submissions made bef ore the AO
during the assessment proceedings. In vie w of the
above f acts, it is held that tr ading resul ts decl ared
by the appell an t are not sub ject to verif ication and
hence the s ame are re jected. The case l a ws
ref erred to by th e appel l ant are o f no help in vie w
of the specif ic f acts of the case of the appell an t, as
has been discussed above. As f ar as the trad ing
addition made by the AO, the appell an t in the
wr i tten sub miss ions sub mitted th at the addition on
the basis of decl ine in G.P. works out of
Rs.40,298/-onl y. In th is reg ard, it is noted th at the
AO specif ical l y mentioned in the assess men t order
th at the GP decl ared in the ye ar under
consider ation is not co mp arabl e wi th the l as t ye ar
since trad ing account has not been prepared on the
same bas is in view of the f ac t that price of bardana
was included in the turnover of the l ast year bu t
not of the year under consideration. T aking in
consider ation the entire ty of f acts, the addition
made by the AO is res tricted to Rs.1 l akh wh ich
wo uld meet the end of justice."
10. Before us, ld. counsel for the assessee reiterated the
submissi ons made before l ower authorities. She further
submitted that addition has been made on adhoc basis,
which is not sustainable in l aw. On the other hand, ld.DR
strongly supported the order of AO and CI T(A) and submitted
that specific figures have been poi nted out by the AO.
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11. After consideri ng rival submissions, we find that over
valuation of closing stock cannot be a reason for making
addition to the trading resul ts because over valuati on would
itself result into higher profits. Simi larly, the figure of
opening stock can also not be interfered. No other specific
defect has been pointed out by the AO and addition seems to
be merely on adhoc basis, which cannot be made as per the
law. Accordingly, we set aside the order of the CIT( A) and
delete the addition.
12. In Ground No.4, after consideri ng both parties, we
found that during assessment proceedings, AO noticed that
assessee has shown househol d withdrawal s only for
Rs.81,000/- and after considering reply of the assessee, AO
estimated the withdrawals at Rs.15,000/- per month, which
would make the total expenditure required at Rs.1,80,000/-
and accordi ngly, he made additi on of Rs.1,00,000/-. On
appeal, additi on was confirmed by ld. CI T( A).
13. Before us, ld. counsel for the assessee submitted that
this additi on has also been made on purely estimated basis.
She further submitted that assessee is wife of Shri Des Raj
and was livi ng with her two grown-up sons. No expenditure
was incurred on education. Moreover, her husband as well
as both sons were income ta x assessees and had also made
some withdrawal s. In this regard, she referred to page No.4
to 7 of the Paper Book.
14. On the other hand, ld. DR strongl y supported the order
of CI T(A) and submitted that assessment year i nvolved is
2008-09 and in the present i nflati onary time, withdrawal of
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Rs.15,000/- per month esti mated by the AO was quite
reasonable.
15. We have considered rival submissions careful ly and
find some force i n the contentions of both parti es. It cannot
be doubted that in the present inflationary ti mes, some
minimum withdra wals are required by everybody. Though, it
was found that assessee's husband and both her sons had
filed returns of income tax, but no detail s of their
withdrawals have been furnished before us. Therefore,
considering overall circumstances, we restrict the addition
of Rs.1,00,000/- to Rs.50,000/-. Accordi ngly, we set asi de
the order of ld. CI T(A) and direct AO to make addition of
Rs.50,000/- to wards household wi thdrawal s.
16. In the result, appeal is partly allo wed.
Order pronounced in the Open Court on 13 t h June,2012.
Sd/- Sd/-
(H.L.KARWA) (T.R.SOOD)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: ...............June,2012.
`Poonam'
Copy to:
The Appellant, The Respondent, The CI T(A), The CI T,DR
Assistant Registrar, I TAT
Chandigarh